Financial life in a big town

Simon Property Group Inc. late Wednesday reiterated its interest in buying General Growth Properties Inc. despite General Growth’s announcement that it has reached a $2.6 billion equity deal with Brookfield Asset Management Inc.

If approved by a bankruptcy court judge, the deal announced Feb. 23 by Chicago-based General Growth (Pink Sheets: GGWPQ) would allow the operator of the Regency Square Mall to exit Chapter 11 bankruptcy protection and possibly avoid being taken over.

Officials with Simon (NYSE: SPG), based in Indianapolis, called the deal between General Growth and Brookfield “inferior and highly conditional.”

Last week, Simon offered General Growth $10 billion, including $9 billion in cash. A total of $7 billion would have gone to creditors and $3 billion to shareholders.

In a letter to Simon executives, General Growth officials rebuffed the offer, saying it was “not sufficient to pre-empt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the company’s stakeholders cash advance america.”

After learning of General Growth’s deal with Brookfield, Simon officials accused General Growth officers of not following the due-diligence process it referred to.

“General Growth’s proposed recapitalization amounts to a risky equity play on the backs of its unsecured creditors,” Simon officials said in the release. “While continuing to block the immediate and certain 100 percent cash recovery provided by Simon’s offer, General Growth has pre-empted its own self-proclaimed ‘process’ in favor of a highly speculative and risky plan to attempt to raise $5.8 billion of new capital in today’s uncertain markets.”

General Growth filed for protection under Chapter 11 of the U.S. Bankruptcy Code in April last year. In December, it won court approval to restructure about $10.25 billion of its debt on 103 of its 200 properties.

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Bills that would change intrastate access charges — the fees phone companies charge each other for their customers’ in-state long-distance calls.

HB1750 > Introduced by Rep. Timothy Jones, R-Eureka — This one has already passed the House and has been sent to the Senate. It would reduce intrastate charges by 50 percent over 10 years. Exempts companies with fewer than 25,000 lines. Contains no explicit approach for companies to make up any revenue lost.

SB698 > Introduced by Sen. John Griesheimer, R-Washington — Would lower rates by 50 percent over five years. Companies serving high-cost areas would be allowed to raise their rates to make up the lost revenue.

SB 785 > Introduced by Sen. Kurt Schaefer, R-Columbia — Would reduce rates by 45 percent, but would offset those losses through a state universal service fund, supported by fees on companies that provide Internet-based phone service and mobile radio service. The act also exempts companies with fewer than 25,000 lines.

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President Obama will sign an executive order Thursday to set up a bipartisan fiscal commission to weigh proposals to rein in the soaring federal debt, according to a White House official.

The official, who requested anonymity because the President has not made the announcement yet, said the co-chairs of the commission will be Democrat Erskine Bowles, former White House chief of staff for Bill Clinton, and Alan Simpson, former Republican Senator from Wyoming. It’ll be officially titled the National Commission on Fiscal Responsibility and Reform.

In his weekly radio and Internet address this past Saturday, Obama touted the commission as the best way to attain "long-term deficit reduction" at a time when Congress seems paralyzed to come together on the mix of spending cuts and tax increases that will likely be needed to balance the nation’s budget.

"Because in the end, solving our fiscal challenge — so many years in the making — will take both parties coming together, putting politics aside, and making some hard choices about what we need to spend, and what we don’t," Obama said Saturday. "It will not happen any other way."

Obama has complained bitterly about the fact that a stronger fiscal commission was killed in the Senate earlier this month after several Republicans dropped their previous support after the President declared he would back it, leading to Democratic charges that the GOP was simply trying to deny Obama a victory.

"Unfortunately this proposal — which received the support of a bipartisan majority in the Senate — was recently blocked," Obama said in Saturday’s address. "So, I will be creating this commission by executive order."

The stronger commission, which was proposed by Sens. Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.), would have had the full force of law instead of just being created by executive order. It would have mandated that the commission’s recommendations had to be voted on both chambers of Congress, forcing lawmakers in both parties to vote up or down on the panel’s expected recommendations on spending cuts and tax hikes.

Under this scenario, the commission will not have the power to force Congress to cast politically unpopular votes. So the report could wind up being another blue ribbon panel report that sits on a shelf somewhere, unless there is public pressure for Congress to act on the proposals.

The commission is expected to study the problem for the next several months and then release its report with recommendations shortly after the 2010 election so that it does not tied up in the politics of the midterms. The new Congress that takes office in 2011 would then have to decide whether or not it wants to consider the proposals. 

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The biggest gathering of the global mobile phone industry begins on Monday in Barcelona, and much of the talk will be about the company that is not there: Apple.

Its iPhone has been imitated by larger competitors like Samsung Electronics, Nokia, LG and Research In Motion. All of them will be showing touch-screen devices and application stores, two innovations popularized by the iPhone.

In App Planet, a special section of the sprawling Fira de Barcelona convention grounds in the city’s center, more than 50 small software developers, many of whom make applications for the iPhone, will display the device’s capabilities. Elsewhere, manufacturers of netbooks and other mobile, connected devices will show their answers to the iPad, the tablet computer Apple introduced last month in San Francisco.

Meanwhile, Apple’s longtime rival, Microsoft, will be seeking some attention for the first glimpse of its Windows Mobile 7 operating system software for cell phones. The company does not plan to offer it on devices yet, according to people familiar with the company’s plans. Microsoft’s impact on the industry has been diminishing in the face of increased competition from other operating systems.

Apple, one of those new competitors, has never exhibited at big industry trade shows, including the Mobile World Congress. Secretive and focused, Apple rarely ventures beyond its own well-staged promotions. The company has sent executives to the Barcelona show, but has never taken center stage.

“They typically do not exhibit at non-Apple events, but we would very much like to have them join us,” said Claire Cranton, a spokeswoman for the GSM Association, the organizer of the annual Barcelona convention. “Apple products will be highly visible at the show.”

Apple has leapfrogged its Asian rivals to become the world’s third-largest maker of smartphones, the fastest-growing part of the mobile phone market. As of December, Apple had a 16.4 percent share of the market, behind Nokia and Research In Motion, which makes the BlackBerry, according to Strategy Analytics. And Apple is growing faster than either one.
Apple’s ’s growing influence on the global mobile industry stems from the way the iPhone convinced consumers to use wireless data. Wireless carriers worldwide have been seeking to increase their revenue from data use, like texting or browsing the Web, as the revenue from voice calls decline. The iPhone’s 133,000 apps that do anything a computer can do and more increase data use.

“With the iPhone, Apple has changed the paradigm of the mobile phone industry, just as Apple changed the MP3 industry with the iPod,” said Carolina Milanesi, an analyst at Gartner, a research firm free business cards. “They have shifted the focus from the technology to the services.”

The new iPhone 3GS will be part of the official display of T-Mobile, the wireless unit of Deutsche Telekom, which sells the device in 12 countries and is the exclusive seller in Germany.

Michael Hagspihl, a T-Mobile vice president in Bonn in charge of relations with cell phone makers, said the iPhone had brought T-Mobile 1.2 million new customers in Germany. “It’s been a real success for us,” Hagspihl said. “The iPhone has brought lots of new customers to our network, and our data consumption has gone through the roof.”

Should Apple ever decide to sell the iPhone through multiple operators in the United States, T-Mobile USA would definitely be interested, Hagspihl said.

So far, AT&T has the exclusive American rights to the iPhone.

But in France and Britain, Apple ended exclusive relationships and is selling the iPhone through several operators besides its original partners, France Telecom’s Orange and Telefonica’s O2.

Even after losing the exclusive selling rights in France, Orange has had no decline in iPhone sales, said Cynthia Gordon, an Orange vice president who oversees the relationship with Apple.

“Apple has had a major impact on the overall market and a very positive impact on Orange’s business,” Gordon said.

Orange is one of Apple’s biggest operator partners, Gordon said.

The French operator sells the iPhone in 29 countries in Europe, Africa, Asia and the Middle East. Through October, Orange had sold 1.7 million iPhones, which she said was more than any other operator in Europe and Africa.

IPhone sales are helping Orange offset declines in voice revenue, Gordon said.

“It has been a platform for us to build on our own sales,” she said. Besides attracting new customers and retaining old ones, the iPhone allowed Orange to develop the Orange TV Player, a programming application for viewing 60 TV channels on the iPhone in France.

Apple and Orange developed the application together, she said.

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Americans backed off from their holiday spending pace in January, but retail sales rose for a third month in a row compared with a year earlier, largely because of higher gas prices, according to figures released Wednesday.

Analysts expect the modest spending pace to improve, though it will be far from robust as high unemployment and tight credit show little sign of disappearing payday loan lenders.

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Solar power company GreenVolts Inc. hired Uday Bellary as its chief financial officer.

Bellary worked previously at Atrica Inc., where he was CFO and helped the company raise $34 million in equity and debt. That company was ultimately bought by Nokia Siemens Network. He was also CFO of Metro Optix. and MMC Networks.

GreenVolts’ CEO David Gudmundson will be his boss. Gudmundson took over as CEO in October, when previous CEO Gary Beasley left for a job in private equity.

Fremont-based GreenVolts makes “concentrating photovoltaic” technology — systems that track the sun and with mirrors that focus sunlight onto solar cells for greater generating efficiency.

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Greece’s biggest union approved the second mass strike this month and tax collectors began a 48-hour walkout, showing that Prime Minister George Papandreou’s parliamentary majority may not be enough to implement his plan to cut the European Union’s largest deficit.

GSEE, which represents about 2 million workers in the private sector, voted at a meeting in Athens today to walk out Feb. 24. The main public-employee union plans a Feb. 10 strike to protest spending cuts as Papandreou steps up budget cuts to persuade investors Greece won’t need a bailout.

“It is still the beginning,” Stathis Anestis, the GSEE spokesman, said on the telephone today. The slogan for the strike is “people come first, markets and profit second,” he said. Anestis reiterated the union’s view that Papandreou’s government “succumbed” to the markets.

Greece’s plan to narrow the budget gap won European Commission backing yesterday after the government announced more measures to reduce the shortfall. Papandreou promised to increase fuel taxes and raise the retirement age, while retreating on a promise to raise wages faster than inflation, a pledge that helped him win elections in October.

“The first part of the action plan is on its way and now has the EU’s approval,” said Ioannis Sokos, a London-based interest-rate strategist at BNP Paribas SA. “What remains is the second part which has to do with the Government versus the Greek people. This is as tough as the first part.”

Stocks, Bonds

The benchmark ASE stock index fell about 3 percent today. Bond rose after European Central Bank President Jean-Claude Trichet said he is confident that Greece can cut its budget deficit. The risk premium investors demand to buy Greek debt over comparable German 10-year bonds narrowed 3 basis points to 347 basis points.

“We expect and we are confident that the Greek government will take all the decisions that will permit them to reach that goal” of cutting the deficit below the European Union’s limit, Trichet said at a press conference in Frankfurt.

Papandreou, 57, has appealed twice this week for Greeks to accept “painful” measures, saying the country can’t afford strikes and blockades. The previous government of Kostas Karamanlis was plagued by labor protests after he tried to tighten pension rules and raise taxes to shore up the government’s finances.

Tax Collectors Strike

The tax collectors struck to protest cuts in bonuses to the public sector. About 98 percent of the 14,000 collectors joined the protest, a POEDY-DOY union spokeswoman said. Also striking for 48 hours are customs workers and Finance Ministry employees, who blocked entry to the economy and finance ministries in central Athens today, the state-run Athens News Agency reported.

“The majority of Greek society continues to support us because it knows these are necessary decisions and taken with a sense of justice,” Finance Minister George Papaconstantinou told Greek Mega TV in an interview late yesterday.

The plan endorsed by the European Union would slash the deficit of 12.7 percent of gross domestic product to within the EU’s 3 percent limit in 2012. Concern that Greece and other European nations may struggle to contain their deficits has pushed the euro down more than 7 percent since late November.

Joaquin Almunia, the EU’s monetary-affairs commissioner, was forced yesterday to reject suggestions International Monetary Fund aid would be needed.

The euro nations “have taken the situation in hand,” IMF Managing Director Dominique Strauss-Kahn said today on RTL radio in France. “We are there to help, if asked, but I understand that the euro nations want to handle the situation themselves.”

Union Tests

Greek unions have already tested Papandreou, who heads the socialist Pasok party. Dockworkers struck for several weeks in October to demand the government keep a promise to re-examine the handover of part of the port to Hong Kong-based Cosco Pacific Ltd. Farmers have been blocking roads and border posts for about two weeks to demand higher prices.

Support for the previous Karamanlis government was weakened by December 2008 riots sparked by the police shooting of a teenager. At the time, GSEE and ADEDY, the civil-service group representing about 600,000 state workers, rebuffed a call from the prime minister to cancel a planned general strike to prevent more clashes, adding to the pressure on Karamanlis.

“Greece and the rest of the fiscally challenged periphery is still in for a bumpy ride, not least because the social and political opposition to austerity programs of this kind is likely to build from here,” said Russell Jones, head of global fixed-income strategy at RBC Capital Markets in London.

Strike Next Week

ADEDY called its Feb. 10 strike to oppose plans by Papandreou to deepen spending cuts and to limit wage increases to those earning less than 2,000 euros ($2,782) and to trim bonuses for all state workers.

Papapandreou widened the wage freeze to all public workers on Feb. 2. State pay increases provide a gauge for increases given to workers in the private sector.

“Our worst expectations were confirmed,” ADEDY Chairman Spyros Papaspyros said yesterday. “There is more to come.”

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Shares of Macy’s Inc. fell about 1 percent Monday afternoon after a Deutsche Bank analyst downgraded the stock to “hold” from “buy.”

According to a MarketWatch report, analyst Bill Dreher Jr. said the department store chain’s “My Macy’s” initiative, which consolidated merchandising and tailored it to local markets, hasn’t produced the expected results.

“Macy’s decentralization initiative is developing awkwardly and will likely need years of refinement before demonstrating significant traction," Dreher said in the MarketWatch story. He also lowered his first-quarter earnings forecast to $1.21 per share from $1.25. Analysts. on average, expect earnings per share of $1.18.

Shares of Macy’s (NYSE: M) lost about 1.5 percent, or 24 cents, to $15.69 in Monday afternoon trading.

Macy’s, with corporate offices in Cincinnati and New York, operates about 850 department stores in 49 states, the District of Columbia, Guam and Puerto Rico.

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